Revolution in the Global Logistics Sector – The Physical Internet

Comprehensive interconnection, speed and effectiveness – a world without the Internet is unimaginable. When something works this well, you have to ask why it only works in the digital world and not the real, physical world. “By 2050 at the latest, the situation may change. The ‘Internet of Things’ will revolutionize the world to the same extent that the Internet did before it,” said Rod Franklin, professor for logistics at Kühne Logistics University in Hamburg.

As efficiently as supply chains are organized today, “they follow a hypothesis that accepts loads of less than full capacity plus the higher energy costs connected to this, and delays as an intrinsic part of the system,” added Franklin. Today, we can determine exactly where specific goods are located within the supply chain at a specific time and inform our customers that the circumstances dictate a probable delay in delivery of a few days. This represents major progress when it comes to communication. “However, we could also think about how goods might follow completely new channels to get to customers and how to avoid wasting as many resources as possible in the process. We could transfer the unbeatably efficient logic of the Internet to the physical world,” said the logistics expert.

What we need are smaller, standardized container formats, open source software for complete supply chain maps, and transport means that can be used jointly to move goods around the globe and bring them to their destinations. And of course the vision that this is where the future of logistics lies is also necessary. “Logistics is the most-used industry in the world and at approximately 15% of global GDP annually, also one with significant potential for added value. But we are still not using it effectively enough,” Franklin noted. Only around 10 percent of the logistics services are pure transport services – empty journeys, idle time, loading and unloading take up the remainder.

How would a supply chain based on the Physical Internet look? Franklin describes it like this: “Trucks will always be loaded to their maximum capacity: therefore, highly effectively. This would eliminate empty journeys. Open source software would ensure that only goods that can be immediately re-distributed by other logistics centers along the route would be transported. It does not matter which producer is the point of origin; and who the transport means belongs to is also unimportant.” The advantages are obvious. Trucks would always be effectively at 100% capacity. The initial drivers would only travel a specific route – others would be responsible for forwarding the freight – and they would transport other goods in other trucks back to the hub in the evening and then go home. The Physical Internet advocate’s balance is convincing: “In sum, this would mean less traffic on the roads, lower emissions and costs, and greater speed, quality, and service.”

“The Physical Internet is what you get when you think green logistics through to the end,” said Franklin. “And it would be a completely new form of cooperation within the logistics sector. Not all companies can develop their own global network. The sum of all the providers equals the global logistics network, and of course it has to translate into a fair price model in which each provider is appropriately compensated for its part of the logistic service.” When looking into the future, he is sure of one thing: “We can stop concentrating on optimizing the means of transport and start focusing on how we transport. Routes and ownership of the means of transport will no longer be important – the focus will be on speed, costs, and service quality.”

However, one problem remains: on land, the highly successful standard container for maritime transport is only suitable for train transport. In order to realize the Physical Internet, we will have to develop smaller standard containers that facilitate a producer-to-consumer supply chain. “But is there any reason to think this can’t happen?” asked Franklin. After all, no one saw much of a future for ship containers in the 1950s. But without them, today’s global economy would not exist.

The Physical Internet will require us to rethink – and think innovatively, too. “We have the technical and technological prerequisites now. Industry 4.0, which is based on digitalization, interconnection and automation, is driving the need for Global Logistics 4.0,” said Franklin with conviction. “If we take on the challenge of re-organizing supply chains and learn to understand them as completely new forms of cooperation, we can change the world for the better.”More information about Rod Franklin.